How Warren Buffett's TSMC Exit Became a $16 Billion Lesson in Market Timing

When legendary investor Warren Buffett stepped away from daily operations at Berkshire Hathaway in January 2025, he left behind a six-decade track record of disciplined capital allocation that transformed the conglomerate into one of only a dozen trillion-dollar market cap companies. Yet even the Oracle of Omaha’s extraordinary career includes a decision that stands out as a cautionary tale: his brief investment in Taiwan Semiconductor Manufacturing, which has since evolved into one of the most costly missed opportunities in Berkshire’s investment history.

In the fall of 2022, when equity markets were battered and valuations appeared attractive, Buffett orchestrated Berkshire’s purchase of 60.06 million shares of TSMC for approximately $4.12 billion. The move aligned perfectly with his established playbook—buying quality assets during market dislocations when fear had temporarily overwhelmed fundamental value. What unfolded over the following months, however, demonstrated that even the most time-tested investing philosophies require perfect execution.

The Bedrock Principles Behind Berkshire’s Success

Warren Buffett’s approach to investing rested on several interconnected pillars that defined Berkshire Hathaway’s trajectory. His unwavering commitment to long-term ownership meant holding positions for decades rather than quarters, allowing compounding to work its magic through inevitable market cycles. This patient orientation wasn’t passive—it was rooted in a sophisticated understanding that economic expansion periods far outweigh recessions over extended timeframes.

Buffett also maintained disciplined pricing discipline. He viewed purchasing a world-class business at a fair price as substantially superior to acquiring a mediocre company at a bargain valuation. This selectivity meant frequently sitting idle during bull markets, waiting patiently for dislocations to emerge. He gravitated toward market-leading enterprises with durable competitive moats, favoring companies whose advantages proved sustainable through changing competitive landscapes. Additionally, corporations that returned capital consistently through dividends and buyback programs attracted his investment focus, as these mechanisms aligned management incentives with long-term shareholder value creation.

The TSMC Opportunity and Initial Investment Thesis

The case for Taiwan Semiconductor initially appeared compelling. As the world’s dominant custom chip fabricator, TSMC manufactured the preponderance of advanced processors destined for Apple’s ecosystem while serving as the essential foundry for Nvidia, Broadcom, Intel, and Advanced Micro Devices. The company possessed a technological fortress: its proprietary chip-on-wafer-on-substrate architecture allowed customers to stack graphics processing units with high-bandwidth memory specifically for AI-accelerated computing environments.

Furthermore, TSMC occupied a unique position at the epicenter of the artificial intelligence revolution. The explosive demand for Nvidia’s specialized processors meant TSMC would inevitably become indispensable infrastructure for the expanding AI ecosystem. The timing of Berkshire’s entry appeared fortuitous—purchasing during market weakness while positioning the portfolio for participation in technology’s most significant development cycle.

When Geopolitics Interrupted the Investment Thesis

The investment landscape shifted dramatically following the Biden administration’s passage of the CHIPS and Science Act in 2022. This legislation aimed to catalyze domestic semiconductor manufacturing capacity within the United States while imposing stringent restrictions on exports of advanced AI-capable chips to China. These policy initiatives introduced unexpected geopolitical dimensions that fundamentally altered the TSMC investment calculus.

During a May 2023 investor call, Buffett articulated his reasoning for abandoning the position, stating succinctly: “I don’t like its location, and I’ve reevaluated that.” His comment reflected concerns that Taiwan’s geographic position and the evolving restrictions on semiconductor exports might create challenges comparable to those facing other Taiwanese technology enterprises. Between the fourth quarter of 2022 and the first quarter of 2023, Berkshire liquidated 86% of its stake, eventually exiting the position entirely within just five to nine months of purchase.

The Cost of Mistimed Exit

What transpired after the exit proved humbling. Demand for GPU capacity reached unprecedented levels, transforming TSMC into a critical bottleneck in the AI infrastructure buildout. The company aggressively expanded production capacity, particularly for CoWoS advanced packaging technology, setting the stage for dramatic revenue acceleration. By July 2025, TSMC joined the exclusive trillion-dollar market valuation club.

Had Berkshire maintained its original 60-million-share stake without selling a single share, that position would currently command a value approaching $20 billion. Instead, the decision to exit cost Berkshire Hathaway approximately $16 billion in unrealized gains—a shortfall that ranks among the most expensive departures from Buffett’s established investment principles. The error wasn’t in the initial analysis; it was in allowing external factors to override a sound fundamental thesis about a world-class business at reasonable valuation.

What This Means for Berkshire’s Future

The TSMC episode demonstrates that even legendary practitioners occasionally violate their own rules, and when they do, the financial consequences can be staggering. Greg Abel, who assumed the CEO role following Warren Buffett’s retirement, will likely internalize this lesson as he stewards Berkshire’s capital allocation strategy. The core principles that generated the conglomerate’s 6.1-million-percent cumulative return remain as relevant as ever, provided they’re applied with consistent discipline through market’s inevitable disruptions.

The Taiwan Semiconductor situation illustrates why long-term investing frameworks, competitive moat analysis, and resistance to short-term market noise remain foundational to building generational wealth. For Berkshire Hathaway and its shareholders, the $16 billion cost of this rare deviation from principle serves as an expensive but powerful reminder that staying true to disciplined investing philosophy matters more than any individual tactical decision.